February 12, 2020
The family limited liability limited partnership can have significant asset protection advantages. In general, a FLLLP (the “FLLLP”) is a partnership consisting of at least one (1) general partner and one (1) limited partner. A general partner has the sole responsibility and authority to control the partnership (i.e., the general partner makes investment decisions and determines when to distribute assets). A limited partner has only a passive investment in the partnership and generally does not participate in partnership decisions.
The initial partners of a FLLLP are typically parents and their descendants (or trusts for descendants).
The interest of a limited partner in a FLLLP is not “exempt” from creditors under
A creditor’s exclusive remedy under
A creditor of a limited partner seeking to obtain such an exclusive remedy must apply to a civil court to obtain a “charging order” gainst partnership distributions. If the general partner awards no distributions to limited partners, then the creditor gets nothing. Moreover, in a properly drafted partnership agreement, a creditor should be given no rights to inspect the books and records of the partnership so that he is unaware of partnership income or partnership business. Additionally, a creditor who obtains a “charging order” is responsible to pay the income tax and the debtor partner’s share of partnership income even if no assets are distributed.
These materials have been prepared for informational purposes only and are not legal advice. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. Internet subscribers and online readers should not act upon this information without seeking professional counsel.